Paying Off Student Loans: 8 Helpful Strategies

After your college graduation, you may have been one of the many students to enjoy a financial grace period. Some student loans give you a few months to get a job and start making money before beginning your monthly payments. Now you’re facing a mountain of debt that you’re not sure how to handle.

Paying off student loans takes time, but these eight helpful strategies can make things easier. Check out all the options you can use to tackle your debt and get rid of it faster than previously expected.

1. Create Your Monthly Budget

Your post-college budget will look much different than when you were a student. Your full-time job gives you more income and new expenses, so make a monthly budget that considers your new lifestyle.

A reasonable budget calculates your income, subtracts your expenses and assigns jobs to the leftover money. Because your loans will be part of your regular expenses, you can use any extra money to build your savings or treat yourself to some occasional fun spending.

2. Check Your Servicer

Your first instinct might be to make extra payments whenever possible. The minimum monthly fees will reduce your debt by the estimated final payment date, which can be anywhere from a few years to a few decades. Paying more than the minimum reduces that time estimate, but it depends on your servicer.

Some student loan servicers take those extra payments and apply them to next month’s minimum. You won’t get ahead of the total balance. Instead, contact your servicer and ask them to put any extra payments towards your balance instead of monthly due dates.

3. Refinance to Save Money

If your minimum payment is astronomical and you can’t imagine how you’ll put extra money towards your loans, refinancing may be in your best interest. When you refinance, a second lender pays off your existing debt and gives you a new loan. Typically, this loan has a lower interest rate and a new payment schedule.

Find the lowest interest rate you qualify for by talking with different lenders about their refinancing options. You may also be able to refinance with a cosigner to get a lower rate based on their income, credit score, and payment history. Your parents, friends, or spouse could potentially fill this role.

4. Use Your Tax Refunds

People use their yearly tax refunds in many ways, but you can always use it to get ahead of your student loans. Even if it’s not a big refund, you’ll pay off more debt and decrease that monthly interest payment. Since your interest is what takes extra money in addition to your original loan, putting your refunds towards reducing your debt will result in more significant long-term savings.

5. Research Loan Forgiveness

Graduates with federal student loans can inquire about getting them forgiven. Your total debt, career and more must meet specific eligibility qualifications for this to happen, so it might not be possible for everyone.

Teachers who work for five years in designated schools might be eligible for debt forgiveness. Government workers, servicemen and women in the military, and AmeriCorp participants also have this opportunity. Research your career and loans to determine if this is a way to significantly reduce your debt without paying more money.

6. Track Your Progress

After months or years of sacrificing every spare dollar for your student debt, you’ll likely feel discouraged and frustrated. When you don’t feel motivated, it’s easy to slip behind on your payments and owe more later. 

Track your progress to stay motivated in the long run. Create a fun graphic that gets smaller every time you make a payment to visualize what you’ve achieved. Celebrate the milestones to recognize your hard work and never give up on paying back your loans.

7. Tackle High Interest Rates

If you took out student loans from more than one lender, compare their interest rates. Higher interest rates will take more of your money. Paying off student loans becomes easier when you tackle the highest interest rates first. Pay more on those debts while meeting the monthly minimum on others. You’ll reduce your most significant loans and gradually accrue smaller payments.

8. Set Reasonable Expectations

It would be wonderful to win the lottery and pay your loans off all at once, but that’s not likely going to happen. Instead of daydreaming about how to get rid of your loans with massive payments, set reasonable expectations.

Your debt won’t go away overnight, so don’t challenge yourself to make that happen. Paying the monthly minimums and throwing a bit extra at those interest rates is a much more reasonable path forward.

Stick With Your Plan

Working towards a new goal is exciting, but it can become exhausting when the finish line is years away. Paying off student loans is all about sticking with your plan. Use these tips to find the resources and tricks available to you, then don’t give up on your debt payment strategy. With time, you’ll watch your loans dwindle until you’re free of monthly payments.